PART I

Oaxaca Mining Unit

During 2015 , we continued to deve lop the Arista underground mine reaching Level 21 on the decline ramp by year end. We developed multiple stopes and working faces for mining, predominantly from Levels 14 to Level 19 during the year. The mining methods of long-hole stoping and cut-and-fill were utilized.

We   also completed phase three of the tailings impoundment facility which is estimated to provide approximately two and a half years of additional holding capacity. A phase four, in which the existing dam is lifted, is planned during 2017   and is estimated to provide an additional three year s of holding capacity .

Exploration work focused on the Arista deposit, including follow-up at the Switchback vein system which is an area of mineralization approximately 500 meters northeast of the Arista vein system.  D rill res ults have intercepted at least seven veins with mineralized material identified al ong a strike length of nearly 45 0 meters and a vertical depth of more than 450 meters. We developed an underground drift from Arista toward Switchback with a target of reaching the mineralized Switchback veins in 2016. Mine development plans are in place with a goal of developing additional drifts and declines to prepare for extracting mineral ized material from Switchback during the second half of 2016. In addition to testing for water, exploration from the third drill station is expected to provide an advantageous distance and drill angles to continue exploration work at Switchback . This program targets further exploration and delineation of the multiple high-grade parallel veins at Switchback, while continuing to optimize the initial mine plan.

We also performed exploration at several of our other properties, including a surface drill program on portions of the Alta Gracia and Margaritas properties that focused on previously identified drill targets.

Nevada Mining Unit

On our Radar property in Nevada, we conducted detailed and property-wide geologic mapping and geochemical sampling as well as completing an initial 6-hole drill program consisting of 1,985 meters of core drilling .   These holes targeted anomalous gold and mercury–bearing structures along a more than two kilometer trend coinciding with numerous histor ic mercury mines and prospects. Results of the exploration efforts indicated potential of bulk-tonnage high-sulfidation style gold mineralization in the northern and eastern portions of the property area where mineralized targets are hosted in favorable volcanic tuff units. Further exploration drilling is under consideration for a more adequate evaluation of the mineralized potential on the Radar property .   In December 2014, t he Company leased the “Goose” gold property directly adjoi ning the Radar Project from Nevada Eagle LLC. The Goose claims add approximately 100 acres to the Company’s Nevada land holdings .  

In the fourth quarter of 2015, w e acquired an option to purcha se a property held by Silver Reserve Corporation, a wholly-owned subsidiary of Infrastructure Materials Corp. We refer to the property as Gold Mesa, a gold bearing property in south central Nevada’s Walker Lane Mineral Belt .   We also staked 140 additional unpatented claims surrounding the original Gold Mesa property covering an area of approximately 2,800 acres. The additional claims more than double the land position, which now consists of a total of 4,580 acres, increasing our Nevada exploration potential. Although there are no work commitments pursuant to the option agreement, we are evaluating a 2016 drill campaign at Gold Mesa .  T he timing will be subject to obtaining the required drill permits with a goal of extending known gold mineralization through infill and step-out drill holes .

All of o ur operations in Nevada are in the exploration stage.   We believe that our   Nevada properties are highly prospective based on their proximity to other major gold deposits in the Walker Lane Mineral Belt which are known for their significant and high-grade gold-silver production in addition to known mineralization on the properties. We believe that our Nevada properties have excellent potential for discovery of both bulk tonnage replacement-type and bonanza-grade vein-type gold deposits, similar to other gold deposits historically mined in the Paradise Peak and Goldfield districts. Please s ee   Item 2. Properties for maps and additional information.

Dividends  

Since July 2010, we have paid a monthly dividend .  W e declared $0.11 per share and paid $0.12 per share in dividends in 2015 . At the end of 2015, the Board of Directors modified the dividend to one-sixth cent per share per month or $0.02 per share per year . Please s ee   Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities for additional information .

Condition of Physical Assets and Insurance

Our business is capital intensive and requires ongoing capital investment for the replacement, modernization or expansion of equipment and fac ilities. For more information, please s ee Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources , below. We maintain insurance policies against property loss and business interruption and insure against risks that are typical in the operation of our business in amounts that we believe to be reasonable. Such insurance, however, contains exclusions and limitations on coverage, particularly with respect to loss, environmental liability and political risk. There can be no assurance that claims would be paid under such insurance policies in connection with a particular event. Please s ee Item 1A . Risk Factors , below for additional information .

Environmental Matters  

We conduct our operations so as to protect the environment and believe our operations are in compliance with applicable laws and regulations in all material respects. Our operating mine has a reclamation plan in place that we believe meets all applicable legal and regulatory requirements. At December 31, 2015 , $ 2.8 million was accrued for reclamation costs relating to current or previously producing properties.

Competitive Business Conditions

The exploration for, and the acquisition of, gold and silver properties are subject to intense competition. Identifying and evaluating potential mining prospects is a costly and time-consuming endeavor. Due to our limited capital and personnel, we are at a competitive disadvantage compared to many other companies with regard to exploration and, if warranted, advancement of mining properties. Our present limited capital means that our ability to compete for properties to be explored and developed is limited. We believe that competition for acquiring mineral prospects will continue to be intense in the future.

Government Regulations and Permits  

In connection with mining, milling and exploration activities, we are subject to United States and Mexican federal, state and local laws and regulations governing the protection of the environment, including laws and regulations relating to protection of air and water quality, hazardous waste management and mine reclamation as well as the protection of endangered or threatened species. The department responsible for environmental protection in Mexico is Secretaria de Medio Ambiente y Recursos Naturales (“SEMARNAT”), which is similar to the United States Environmental Protection A gency. SEMARNAT has broad authority to shut down and/or levy fines against facilities that do not comply with its environm ental regulations or standards. Potential areas of environmental consideration for mining companies, including ours, include but are not limited to, acid rock drainage, cyanide containment and handling, contamination of water sources, dust and noise.

In connection with our mill and mining operations at the Aguila Project, we have and intend to secure various regulatory permits from federal, state and local agencies. These governmental and regulatory permits generally govern the processes being used to operate, the stipulations concerning air quality and water issues, and the plans and obligations for reclamation of the properties at the conclusion of operations. Regulations require that an environmental impact statement, known in Mexico as a Manifiestacion de Impacto Ambiental (“MIA”), be prepared by a third-party contractor for submission to SEMARNAT. We have   submitted our MIA to SEMARNAT for its review, and it has been approved.   Studies required to support the MIA include a detailed analysis of these areas, among others: soil, water, vegetation, wildlife, cultural resources and socio-economic impacts. Although the regulatory process in Mexico has a

public review component, proof of local community support for a project is required to gain final MIA approval. We have received the required local community support for the Aguila  P roject in the area from which we are currently producing .  

We have obtained in the past, and plan to obtain at the appropriate time, environmental permits, licenses or approvals required for operations. We are not aware of any material violations of environmental permits, licenses or approvals issued with respect to our operations.  

In connection with exploration activities in Nevada, we are subject to various federal and state laws and regulations governing protection of the environment, including , but not limited to, the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response , Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Endangered Species Act; the Federal Land Policy and Management Act; the National Environmental Policy Act; the Resource Conservation and Recovery Act; and related state laws. These laws and regulations are continually changing and are generally becoming more restrictive. Our activities outside the United States are also subject to various levels of governmental regulations for the protection of the environment .   I n some cases, those regulations can be as, or more, restrictive than those in the United States.

Customers

During the year ended December 31, 2015 ,   85% of our revenue was generated from the sales of metals concentrate to Consorcio Minero de Mexico Cormin Mex. S.A. de C.V., a Trafigura Group Company (“Trafigura”). During the same period, 15% of our revenue was generated from the sales of gold and silver doré bars   to Asahi Refining USA, Inc. (“Asahi Refining ”). In the event that our relationship with either Trafigura or Asahi Refining is interrupted for any reason, we believe that we would be able to locat e another entity to purchase our preciou s metals and by-product metals. However, any interruption could temporarily disrupt the sale of our principal products and adversely affect our operating results. We periodically review our options of alternative sales outlets to mitigate the concentration of risk in case of any unforeseen disruptions.

Employees and Contractors

We currently have twelve full-time employees, six of which serve as our executive officers. These individuals devote all of their business time to our affairs.

We contract for the services of appr oximately 400   individuals employed by a third party and also use various independent contractors for constructing our underground mine, surface exploration drilling and trucking .  

If we are unable to achieve gold and silver production levels anticipated from our Aguila Project, our financial condition and results of operation s will be adversely affected.   We have proceeded with the processing of the mineralized material from the Arista underground mine at the Aguila Project based on estimates of mineralized material identified during exploration and in our Proven and Probable Reserve report . However, risks related to metallurgy are inherent when working with extractable minerals. Sales of gold and silver that we realize from future mining activity will be less than anticipated if the mined material does not contain the concentration of gold and silver predicted by our geological exploration,   studies and reports . If sales of gold and silver are less than anticipated, we may not be able to recover our investment in our property and our operations may be adversely affected. Our inability to realize production based on quarterly or annual projections may also adversely affect the price of our common stock and you may lose all or part of your investment.

The volatility of the price of gold and silver could adversely affect our future operations and, if warranted, our ability to develop our properties.   The profitability of our operations, the value of our properties and our ability to raise funding to conduct continued exploration and mine construction, if warranted, are directly related to the market price of gold, silver and other base metals. The price of gold and silver may also have a significant influence on the market price of our common stock. Our decision to put a mine into production and to commit the funds necessary for that purpose must be made long before the first revenue from production would be received. A decrease in the prices of gold and silver may prevent our properties from being economically mined or result in the write-off of assets whose value is impaired as a result of lower commodity prices. The volatility in gold and silver prices is illustrated by the following table, which sets forth for each of the past five calendar years, the average annual market prices in U.S. dollars per ounce of gold and silver based on the daily London P.M. fix:

The price of gold and silver is affected by numerous factors beyond our control, including inflation, fluctuation of the United States dollar and foreign currencies, global and regional demand, the sale of gold and silver by central banks, and the political and economic conditions of major gold and silver producing countries throughout the world.  Accordingly , no amount of planning or technical expertise can fully eliminate these risks. In the event gold or silver prices decline or remain low for prolonged periods of time, we might be unable to develop our properties, which may adversely affect our results of operations, financial performance and cash flows.

Estimates of proven and probable reserves and mineralized material are uncertain and the volume and grade of ore actually recovered may vary from our estimates. The proven and probable reserves and mineralized material stated in this report represent the amount of gold , silver, copper , lead and zinc that we estimated ,   at December 31, 2015, could be economically and legally extracted or produced at the time of the reserv e d etermination . Estimates of proven and probable reserves and mineralized material are subject to considerable uncertainty.   Such estimates are, to a large extent, based on the prices of gold ,   silver, copper, lead and zinc and interpretations of   geologic data obtained from drill holes and other exploration techniques.

Additionally, the term “mineralized material” as used in this report does not indicate proven and probable reserves as defined by Industry Guide 7 (“Guide 7”) promulgated by the SEC or our standards. Estimates of mineralized material are subject to furth er exploration and development and are therefore subject to considerable uncertainty. We cannot be certain that any part or parts of the mineralized material deposit will ever be confirmed or converted into Guide 7 compliant reserves or that mineralized material can be economically or legally extracted.

I f the price of gold or silver declines from recent levels, if production costs increase or   recovery rates decrease , or if applicable laws and regulations are adversely changed, we can offer no   assurance that the indicated level of recovery will be realized or that mineral reserves as currently reported can be mined or processed profitably. If we determine that a portion   of our   ore reserves become uneconomic, this may ultimately lead to a reduction in our reported reserves . Consequently, if our actual mineral reserves are less than current estimates, our business, prospects, results of operations and   financial position may be materially impaired.

Our current property portfolio is limited to a single producing property and our ability to remain profitable over the long-term will depend on our ability to expand the known deposits like Arista and /or identify, explore and develop additional properties . Gold and silver producers must continually replace reserves depleted by production to maintain production levels over the long term and provide a return on invested capital. Depleted reserves can be replaced in several ways, including expanding known ore bodies, locating new deposits, or acquiring interests in reserves from third parties. Exploration is highly speculative in nature, capital intensive, involves many risks and is frequently unproductive. Our current or future exploration programs may not result in new mineral producing operations. Even if significant mineralization is discovered, it will likely take many years from the initial phases of exploration until commencement of production, during which time the economic feasibility of production may change.

As a result of these uncertainties, our exploration programs and any acquisitions which we may pursue may not result in the expansion or replacement of our current production with new ore reserves or operations, which could have a material adverse effect on our business, prospects, results of operations and financial position.

We have incurred substantial losses in the past and may not continue to be profitable.   During the fiscal years ended December 31, 2015, 2014 and 2013 , we reported comprehensive income of $ 3.1 million , $ 15.0 million and $ 5.3   million, respectively. We have accumulated retained deficit of $ (0.9) million as of Dec ember   31, 2015. The downward trend in metal prices in recent years has caused a significant decrease in our profit margin and there is no assurance that we will be profitable in the future. Unexpected interruptions in our mining business may cause us to incur losses, or the revenue that we generate from production may not be sufficient to fund continuing operations including exploration and mine construction costs. Our failure to generate future profits may adversely affect the price of our common stock and you may lose all or part of your investment.

We may require significant additional capital to fund our business plan. We may be required to expend significant funds to determine if mineralized material and proven and probable mineral reserves exist at any of our non-producing properties, to continue exploration, and if warranted, develop our existing properties and to identify and acquire additional properties to diversify our property portfolio. We have spent, and may be required to continue to expend, significant amounts of capital for drilling, geological and geochemical analysis, assaying and feasibility studies in connection with our exploration. We may not benefit from these investments if we are unable to identify commercially exploitable mineralized material.

Our ability to obtain necessary funding for these purposes, in turn, depends upon a number of factors, including our historical and prospective results of operations, the status of the national and worldwide economy, the price of gold, silver and other valuable metals and the costs associated with extracting them . The mining sector has been negatively impacted by a general decline in metal prices over the last five years. We may not be successful in generating or obtaining the required financing, or if we can obtain such financing, such financing may not be on terms that are favorable to us. Failure to obtain such additional financing could result in delay or indefinite postponement of further mining operations or exploration and construction and the possible partial or total loss of our potential interest in our properties.

Revenue from the sale of our metals may be adversely affected by loss or damage during shipment and storage at our buyer’s facilities.   We rely on third-party transportation companies to transport our metals to the buyer’s facilities for processing and further refining. The terms of our sales contracts with the buyers require us to rely on assay results from samples of our metals that are obtained at the buyer’s warehouse to determine the final sales value for our metals. Once the metal leaves our mill facility, we no longer have direct custody and control of these products. Theft, loss, automobile accidents, improper storage, fire, natural disasters, tampering or other unexpected events while in transit or at the buyer’s location may lead to the loss of all or a portion of our metal products. Such losses may not be covered by insurance and may lead to a delay or interruption in our revenue and our operating results may be adversely affected.

Exploration and , if deemed feasible, development of mineral properties is inherently risky and could lead to unproductive properties and/or capital investments.   Our long-term success depends on our ability to identify additional mineral deposits on our properties at our Oaxaca Mining Unit or our Nevada Mining Unit and any other properties that we have or may acquire and to develop one or more of those properties into commercially viable mining operations. Mineral exploration is highly speculative in nature, involves many risks and is frequently unproductive. These risks

include unusual or unexpected geologic formations and the inability to obtain suitable or adequate machinery, equipment or labor. The success of gold exploration is determined in part by the following factors:

Substantial expenditures are required to establish proven and probable reserves through detail drilling and analysis, to develop metallurgical processes to extract metal and to develop the mining and processing facilities and infrastructure at any site chosen for mining.   Whether a mineral deposit will be commercially viable depends on a number of factors, which include, without limitation, the particular attributes of the deposit, such as size, grade, metallurgy, rock competency and proximity to infrastructure like power, water and roads; metal prices, which fluctuate widely; and government regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals , environmental protection and local and communal support. We may invest significant capital and resources in exploration activities and abandon such investments if we are unable to identify commercially exploitable mineral reserves. The decision to abandon a project may have an adverse effect on the market value of our securities and our ability to raise future financing.

We currently do not enter into forward sales, commodity, derivatives or hedging arrangements with respect to our gold and silver production , and as a result, we are exposed to the impact of any significant decrease in the price of gold or silver.   We sell the gold and silver we produce at quoted market metal prices. Currently, we do not enter into forward sales, commodity, derivative or hedging arrangements to establish a price in advance for the sale of future gold or silver production, although we may do so in the future. As a result, we may realize the benefit of any short-term increase in the gold or silver price, but we are not protected against decreases in the gold or silver price. If the gold or silver price decreases significantly, our revenues may be materially adversely affected.

Our producing property is subject to a lease in favor of a third party which provides for royalties on production.   The leased portion of the Aguila property provides for a net smelter return royalty of 4% where production is sold in the form of gold and silver doré and 5% where production is sold in concentrate form. The requirement to pay royalties to the owner of the concessions at our Aguila property, which includes the open pit mine and underground mine, reduces our profitability.

Our profits are subject to two   mining duties imposed by the Mexican government.   The Mexican government requires mineral producers to pay a ‘special’ mining duty to the government of 7.5% on net profits from metal concentrate sales   and an additional ‘extraordinary’ mining duty of 0.5% on gross sales of precious metals of gold, silver and platinum.   This legislation has and may in the future significantly and adversely affect our results of operations, including our cash flows, which may in turn affect the amount of capital we have available for typical uses of cash, including but not limited to, reinvestment into our business, funding new projects and paying dividends to our shareholders.  

The facilities and development of our underground mine and operation of our mill are subject to all of the risks inherent in development and operations. These risks include potential delays, cost overruns, shortages of material or labor, construction defects, breakdowns and injuries to persons and property. We expect to engage a combination of North American and Mexican subcontractors and material suppliers in connection with the continued mine construction of the Aguila   Project. While we anticipate taking all measures which we deem reasonable and prudent in connection with our facilities, construction of the underground mine and the operation of the mill, there is no assurance that the risks described above will not cause delays or cost overruns in connection with such construction or operation. Any delays would postpone our anticipated receipt of revenue and adversely affect our operations, which in turn may adversely affect the price of our stock.  

Our underground mining operations are subject to unique risks.   The exploration for minerals, mine construction and mining operations from an underground mine involve a high level of risk and are often affected by hazards outside of our control. Some of these risks include, but are not limited to, underground fires or floods, fall-of-ground accidents,

seismic activity and unexpected geological formations or conditions including noxious fumes or gases. The occurrence of one or more of these events in connection with our exploration, mine construction, or production activities may result in the death of, or personal injury to, our employees, other personnel or third parties, the loss of mining equipment, damage to or destruction of mineral properties or production facilities, monetary losses, deferral or unanticipated fluctuations in production, environmental damage and potential legal liabilities, all of which may adversely affect our reputation, business, prospects, results of ope rations and financial position.

Our operations are subject to permitting requirements which could result in the delay, suspension or termination of our operations.   O ur operations, including our ongoing exploration drilling programs and production at the Aguila Project, require permits from the Mexican government. If we cannot obtain or maintain the necessary permits or if there is a delay in receiving future permits, our timetable and business plan will be adversely affected.

Our ability to recognize the benefits of deferred tax assets is dependent on future cash flows and taxable income.   W e recognize the expected future tax benefit from deferred tax assets when the tax benefit is considered to be more likely than not of being realized ; otherwise, a valuation allowance is applied against deferred tax assets. Assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, our ability to realize the deferred tax assets could be impacted. Additionally, future changes in tax laws could limit our ability to obtain the future tax benefits represented by our deferred tax assets. At December 31, 2015 ,   our net deferred tax asset s   were  $ 21.1 million .

Our continuing reclamation obligations at our operations could require significant additional expenditures.   We are responsible for the reclamation obligations related to disturbances located on all of our properties, including the Aguila   Project. We have reserved a liability on our balance sheet to cover the estimated fair value of our reclamation obligation. However, there is a risk that any reserve could be inadequate to cover the actual costs of reclamation when carried out. Continuing reclamation obligations will require a significant amount of capital. There is a risk that we will be unable to fund these additional obligations and further, that the regulatory authorities may increase reclamation requirements to such a degree that it would not be commercially reasonable to continue exploration activities, which may adversely affect our results of operations, financial performance and cash flows.

Our operating properties located in Mexico are subject to changes in political or economic conditions and regulations in that country.   The risks with respect to Mexico or other developing countries include, but are not limited to: nationalization of properties, military repression, extreme fluctuations in currency exchange rates, criminal activity, lack of personal safety or ability to safeguard property, labor instability or militancy, mineral title irregularities and high rates of inflation.   In addition, changes in mining or investment policies or shifts in political attitude in Mexico may adversely affect our business. We may be affected in varying degrees by government regulation with respect to restrictions on production, price controls, export controls, income taxes, expropriation of   property, maintenance of claims, environmental legislation, land use, land claims of local people, opposition from non-governmental organizations, water use and mine safety. The effect of these factors cannot be accurately predicted but may adversely impact our operations.

Our ability to develop our Mexican properties is subject to the rights of the Ejido ( agrarian cooperative s) who use the surface for agricultural purposes. Our ability to mine minerals is subject to maintaining satisfactory arrangements with the Ejido for access and surface disturbances. Ejidos are groups of local inhabitants who were granted rights to conduct agricultural activities on the property. We must negotiate and maintain a satisfactory arrangement with these residents in order to disturb or discontinue their rights to farm. While we have successfully negotiated and signed such agreements related to the Aguila Project, our inability to maintain these agreements or consummate similar agreements for new projects could impair or impede our ability to successfully explore, develop and mine the properties.

Competition in the mining industry is intense, and we have limited financial and personnel resources with which to compete.   Competition in the mining industry for desirable properties, investment capital and personnel is intense. Numerous companies headquartered in the United States, Canada and elsewhere throughout the world compete for properties and personnel on a global basis. We are a small participant in the gold mining industry due to our limited

financial and personnel resources. We presently operate with a limited number of personnel and we anticipate operating in th e same manner going forward. We compete with other companies in our industry to hire qualified personnel when needed to successfully operate our mine and mill site. We may be unable to attract the necessary investment capital or personnel to fully explore and if warranted, develop our properties and be unable to acquire other desirable properties. We believe that competition for acquiring mineral properties, as well as the competition to attract and retain qualified personnel, may continue to be intense in the future .

Since a significant amount of our exp enses are paid in Mexican pesos and we sell our production in United States dollars, we are subject to changes in currency values that may adversely affect our results of operation s .   Our operations in the future could be affected by changes in the value of the Mexican peso against the United States dollar. The appreciation of non-U.S. dollar currencies such as the peso against the U.S. dollar increases expenses and the cost of purchasing capital assets in U.S. dollar terms in Mexico, which can adversely impact our operating results and cash flows. Conversely, depreciation of non-U.S. dollar currencies usually decreases operating costs and capital asset purchases in U.S. dollar terms. The value of cash and cash equivalents, and other monetary assets and liabilities denominated in foreign currencies also fluctuate with changes in currency exchange rates.

Our activities are subject to significant environmental regulations, which could raise the cost of doing business or adversely affect our ability to develop our properties.   Our mining operations are subject to enviro nmental regulation by SEMARNAT. Regulations governing advancement of new projects or significant changes to existing projects require an environmental impact state ment, known in Mexico as a MIA. We may also be required to submit proof of local community support for a project to obtain fi nal approval. If an environmental impact statement is adverse or if we cannot obtain community support, our ability to explore and develop our properties could be adversely affected. Significant environmental legislation exists in Mexico, including fines and penalties for spills, release of emissions into the air, and other environmental damage, which fines or penalties could adversely affect our financial condition or results of operation s . In addition, significant state and federal environmental protection laws in the US may hinder our ability to explore at our Nevada Mining Unit and may also delay or prohibit us from developing properties where economic material is found.  

Our business is subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, a breach or violation of which could lead to civil and criminal fines and penalties, loss of licenses or permits and reputational harm. We operate in certain jurisdictions that have experienced governmental and private sector corruption to some degr ee, and in certain circumstances, strict compliance with anti-bribery laws may conflict with certain local customs and practices. T he U.S. Foreign Corrupt Practices Act and anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial advantage. Our Code of Ethics and other corporate policies mandate compliance with these anti-bribery laws, which often carry substantial penalties. There can be no assurance that our internal control policies and procedures will always protect us from recklessness, fraudulent behavior, dishonesty or other inappropriate acts committed by our affiliates, employees or agents. As such, our corporate policies and processes may not prevent all potential breaches of law or other governance practices. Violations of these laws, or allegations of such violations, could lead to civil and criminal fines and penalties, litigation, and loss of operating licenses or permits, and may damage our reputation, which could have a material adverse effect on our business, financial position and results of operations or cause the market value of our common stock to decline.

We are dependent upon information technology systems, which are subject to disruption, damage, failure and risks associated with implementation and integration. We are dependent upon information technology systems in the conduct of our operations. Our information technology systems are subject to disruption, damage or failure from a variety of sources, including, without limitation, computer viruses, security breaches, cyber-attacks, natural d isasters and defects in design. Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. Various measures have been implemented to manage our risks related to information technology systems and network disruptions. However, given the unpredictability of the timing, nature and scope of information technology disruptions, we could potentially be subject to production downtimes, operational delays, the compromising of  c onfidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation

or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.

We may also be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into our operations. We are modifying our enterprise software to support various operational functions, financial reporting and controls management. The modification of this system carries risks such as cost over runs, delays and interruptions. If we are not able to successfully implement these system modifications, we may have to rely on manual reporting processes and controls over financial reporting that have not been planned, designed or tested. Various measures have been implemented to manage our risks related to the system implementation and modification, but system modification failures could have a material adverse effect on our business, financial position and results of operations and could, if not successfully implemented, adversely impact the effectiveness of our internal controls over financial reporting.

The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses. Exploration for and the production of minerals is highly speculative and involves greater risk than many other businesses. Many exploration programs do not result in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Our operations are, and any future mining operations or construction we may conduct will be, subject to all of the operating hazards and risks normally incident to exploring for and mining of mineral properties, such as, but not limited to:

Any of these risks can materially and adversely affect, among other things, the construction of properties, production quantities and rates, costs and expenditures, potential revenues and targeted production dates. We currently have limited insurance to guard against some of these risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a write down of our investment in these interests. All of these factors may result in losses in relation to amounts spent which are not recoverable or result in additional expenses.

We do not insure against all of the risks to which we may be subject in our operations. While we currently maintain insurance for general commercial liability claims and the physical assets at our Aguila   Project, we do not maintain insurance to cover all of the potential risks associated with our operations. We might be subject to liability for environmental, pollution or other hazards associated with mineral exploration and mine construction, which risks may not be insured against, which may exceed the limits of our insurance coverage, or which we may elect not to insure against because of premium costs or other reasons. We may also not be insured against interruptions to our operations. Losses from these or other events may cause us to incur significant costs which could materially adversely affect our financial condition and our ability to fund activities on our property. A significant loss could force us to reduce or terminate our operations.

We depend upon a limited number of personnel and the loss of any of these individuals could adversely affect our business. Due to the relatively limited number of personnel that we employ, we are dependent on certain individuals to run our business. These individuals include our executive officers and other key employees. If any of these individuals were to die, become disabled or leave our company, we would be forced to identify and retain individuals to replace them. There is no assurance that we can find suitable individuals to replace them or to add to our employee base if that becomes necessary. We have no life insurance on any individual, and we may be unable to hire a suitable replacement for them on favorable terms should that become necessary.

In the event of a dispute regarding title to our operating property or any facet of our operations, it will likely be necessary for us to resolve the dispute in Mexico, where we would be faced with unfamiliar laws and procedures. The resolution of disputes in foreign countries can be costly and time consuming. In a foreign country we face the additional burden of understanding unfamiliar laws and procedures. We may not be entitled to a jury trial, as we might be in the United States. Further, to litigate in any foreign country, we would be faced with the necessity of hiring lawyers and other professionals who are familiar with the foreign laws. For these reasons, we may incur unforeseen losses if we are forced to resolve a dispute in Mexico or any other foreign country.

Our directors and officers may be protected from certain types of lawsuits.   The laws of the State of Colorado provide that our directors will not be liable to us or our shareholders for monetary damages for all but certain types of conduct as directors of the company. Our Articles of Incorporation permit us to indemnify our directors and officers against all damages incurred in connection with our business to the fullest extent provided or allowed by law. Additionally, we entered into individual indemnification agreements with our current directors and officers and we intend to execute substantially similar agreements with future directors and officers. The exculpation provisions of any of these items may have the effect of preventing shareholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment or other circumstances. Pursuant to the terms of the indemnification agreements, we are required to advance funds to our directors and officers prior to the final disposition of any threatened or actual legal proceeding, and including in the event it is ultimately determined that such officer or director is not entitled to indemnification pursuant to the terms of the indemnification agreement, in which case we will depend on reimbursement of advanced expenses from such individual.

Risks Related to Our Common Stock

Our stock price may be volatile and as a result you could lose all or part of your investment.   In addition to other risk factors identified and to volatility associated with equity securities in general, the value of your investment could decline due to the impact of numerous factors upon the market price of our common stock, including:

During 2015, the price of our stock has ranged from a low of $1.66 to a high of $3. 83. In addition, stock markets in general have experienced extreme price and volume fluctuations and the market prices of securities have been highly  

volatile. These fluctuations are often unrelated to operating performance and may adversely affect the market price of our common stock. As a result, you may be unable to resell your shares at a desired price.

Past payments of dividends on our common stock are not indictors of future payments of dividends. In 2012, we instituted a monthly cash dividend payable to holders of our common stock. During 2015,   th e monthly dividend was $0.01 per share per month until it was modified in December 2015 to one-sixth of a cent per share per month, or $0.02 per share per year. However, our ability to continue to pay dividends in the future will depend on a number of factors, including cash flow, mine construction requirements and strategies, other acquisition and/or construction projects, spot gold and silver prices, taxation, government imposed royalties and general market conditions. Further, a portion of our cash flow is expected to be retained to finance our operations. Any material change in our operations may affect future dividends which may be modified or canceled at the discretion of our Board of Directors. Any decrease in our monthly dividend would likely have an adverse impact on the price of our common stock.

We are subject to the Continued Listing Criteria of the NYSE MKT , and our failure to satisfy these criteria may result in delisting of our common stock.   Our common stock is currently listed on the NYSE MKT. In order to maintain the listing, we must maintai n certain share prices and other targets , including maintaining a minimum amount of shareholders’ equity and a minimum number of public shareholders. In addition to objective standards, the NYSE MKT may delist the securities of any issuer if, in its opinion, the issuer’s financial condition and/or operating results appear unsatisfactory; if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE MKT inadvisable; if the issuer sells or disposes of principal operating assets or ceases to be an operating company; if an issuer fails to comply with the NYSE MKT’s listing requirements; if an issuer’s common stock sells at what the NYSE MKT considers a “low selling price” and the issuer fails to correct this via a reverse split of shares after notification by the NYSE MKT; or if any other event occurs or any condition exists which makes continued listing on the NYSE MKT, in its opinion, inadvisable.

If the NYSE MKT delists our common stock, investors may face material adverse consequences, including, but not limited to, a lack of trading market for our securities, reduced liquidity, decreased analyst coverage of our securities, and an inability for us to obtain additional financing to fund our operations.

Issuances of our stock in the future could dilute existing shareholders and adversely affect the market price of our common stock. We have the authority to issue up to 100,000,000 shares of common stock, 5,000,000 shares of preferred stock, and to issue options and warrants to purchase shares of our common stock without stockholder approval. As of March 7 , 2016, there were 54 ,266,706 shar es of common stock outstanding. Future issuances of our securities could be at prices substantially below the price paid for our common sto ck by our current shareholders. In addition, we can issue blocks of our common stock in amounts up to 20% of the then outstanding shares withou t further shareholder approval. Beca use we have issued less of our common stock than many of our larger peers, the issuance of a significant amount of our common stock may have a disproportionately large impact on our share price compared to larger companies.

Our awards of stock options to employees may not have their intended effect.   A portion of our total compensation program for our executive officers and key personnel has historically included the award of options to buy our common stock. If the price of our common stock performs poorly, such performance may adversely affect our ability to retain or attract critical personnel. In addition, any changes made to our stock option policies or to any other of our compensation practices which are made necessary by governmental regulations or competitive pressures could affect our ability to retain and motivate existing personnel and recruit new personnel.

property in accordance with Guide 7 .   We do not consider any of our Exploration Properties to be a “material” property for purposes of Guide  7 . We anticipate that all exploration activities at our Exploration P roperties will be funded through our working capital.

We currently have a n interest in nine properties. Six of our properties, including one Operating Property and five Exploration Properties, are within our Oaxaca Mining Unit located in the southern state of Oaxaca, Mexico (“Oaxaca”) .   In addition, we have three Exploration Properties within our Nevada Mining Unit located in south central Nevada’s Walker Lane Mineral Belt in the United States (“Nevada”). We lease two of the Nevada properties and have an option to purchase the third. Please see Item 1. Business   for additional information about our business.

Proven and Probable Reserves

The term “proven (measured) reserves” means reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade, and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurements are spaced so closely and the geologic character is sufficiently defined that the size, shape, depth and mineral content of reserves is well established. The term “probable (indicated) reserves” means reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.

In April 2014, we announced the completion of our initial reserve study and issued a report dated December 31, 2013, confirming the existence of proven and probable reserves as defined in Guide 7. All of our reserves are located at our Arista underground mine.

We plan to update our reserve report annually.

As of December 31, 2015 , our estimate of proven and probable reserves was :  

For comparison, at December 31, 2014, our estimate of proven and probable reserves was:

Notes to the 2015 Proven and P robable (“P & P”) reserves:

Mineralized Material

We use the term “mineralized material” to describe mineralization in our mineral deposits that do not constitute “reserves” under U.S. reporting requirements as governed by Guide 7.

In addition to our proven and probable reserves, we estimated measured and indicated mineralized material within the definition of Guide 7. Mineralized material does not have demonstrated economic viability. The SEC only permits issuers to report “mineralized material” in tonnage and average grade without reference to contained ounces or quantities of other metals.

As of December 31, 2015, our measured and indicated mineralized material was:

For comparison, at December 31, 2014, our estimate of measured and mineralized material was:

Notes to the 2015 measured and indicated (“M & I”) mineralized material:

Our Proven and Probable Reserve and Mineralized Material estimates were prepared by our technical staff under the direction of Barry Devlin, Vice President of Exploration. Mr. Devlin holds a BS degree with honors in Geology, 1981, and a Masters in Geology, 1987, from the University of British Columbia, Vancouver, Canada. He is also a Professional Geologist registered with the Association of Professional Engineers and Geoscientists of British Columbia.

For a description of the key assumptions, parameters and methods used to estimate Proven and Probable Reserves and Mineralized Material included in this Form 10-K, as well as data verification procedures and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other factors, investors may review the annual reserve report posted on the Company’s website ( http://www.goldresourcecorp.com . )

Oaxaca Mining Unit

All of the properties that make up our Oaxaca Mining Unit are located in Oaxaca, Mexico in what is known as the San Jose structural corridor, which runs north 70 degrees west. Our properties comprise 55 continuous kilometers of this structural corridor   which spans three historic mining districts in Oaxaca; the map below shows the general location our properties:

We are granted concessions from the Mexican federal government to explore and mine our properties in Mexico, please see Mining Concessions and Regulations in Mexico ,   below . We hold certain properties as the concession holder and lease other properties from a third party . We are required to pay concession fees to the Mexican government to maintain our interest in these concessions, and we pay concession fees for all of our mineral properties, including those which are subject to the third-party lease. The table below details information related to the mining concessions that comprise our properties in our Oaxaca Mining Unit:

*   One hectare is equal to 2.4711 acres. The 73,748 hectares in which we hold an interest is equal to approximately 285 square miles.

Operating Properties  

Aguila Project

Background: The Aguila Project currently comprises 17 mining concessions aggregating 30,074 hectares as described in the table above.

The early history of activity at the Aguila Project, as known by us, included prospecting and limited mining for gold and silver from the early 1900’s to the mid 1960’s. In 1998, the concessions were leased to Apex Silver Mines

Corporation of Denver, Colorado. Apex carried out an exploration program involving geologic mapping, surface sampling and an 11-hole drilling program (1,242 meters). The results did not meet Apex’s expectations so it cancelled its lease on the property in 2002.

In 2002, we leased the Aguila , El Aire and La Tehuana concessions from a third party. The Aguila and El Aire concessions are part of the Aguila Project and the La Tehuana concession comprises the Margaritas property. The Aguila lease agreement is subject to a 4% net smelter return royalty where production is sold in the form of gold/silver doré and 5% for production sold in concentrate form. Subject to meeting minimum exploration requirements, there is no expiration term for the lease. We may terminate it at any time upon written notice to the lessor and the lessor may terminate it if we fail to fulfill any of our obligations, which primarily consist of paying the appropriate royalty to the lessor.

In August 2003, we commenced an initial drilling and exploration program at the Aguila Project. Through 2015, we have drilled a total of 814 core holes (both surface and underground) equaling 245,738 meters and 166 reverse circulation holes equaling 14,367 meters for a total of 980 holes totaling 260,105 meters.

In 2010, we acquired from a third party , at no additional cost, the El Chacal and El Pilon concessions, which are subject to a 2% royalty, but are not subject to the Aguila lease agreement .   We filed for and received additional concessions from the Mexican government which are also not part of the concessions leased or acquired from the third party. The mineral concessions making up the Aguila Project are located within the San Pedro Totolapam and San Pedro Quiatoni Ejidos .

Location and Access :   The Aguila Project is located in the Sierra Madre del Sur Mountains of southern Mexico in the centr al part of the State of Oaxaca. The property is located along a major paved highway approximately 120 kilometers southeast of Oaxaca City, the state’s capital city. The property is approximately four kilometers due northwest from the village of San Jose de Gracia .   We have constructed gravel and paved roads from the village to the mine and mill sites which supports adequate access to the property.

The climate of the Aguila Project area is dry and warm to very warm with most rainfall occurring in the summer and annual precipitation averaging 423.7 mm. The average yearly temperature is 26.6 degrees centigrade. The area is very rocky with arid vegetation. Subsistence farming occurs and the main agricultural crop is agave cactus that is cultivated for the production of mescal .  

Geology and Mineralization :   The Aguila Project is located in the San Jose de Gracia Mining District in Oaxaca. Multiple volcanic domes of various scales, and probably non-vented intrusive domes, dominate the district geology. These volcanogenic features are imposed on a pre-volcanic basement of sedimentary rocks. Gold and silver mineralization in this district is related to the manifestations of this classic volcanogenic system and is considered epithermal in character.

Historically, we have produced ore from two locations on the Aguila property, the Aguila open pit mine and the underground mine at the Arista vein system. The Aguila open pit mineralization is considered low sulfidation, epithermal mineralization primarily of gold with some silver and no base metals. The Arista vein system is considered intermediate epithermal mineralization of gold, silver, copper, lead, and zinc. The host rock at the Arista vein system is primarily andesite.

Facilities :   We constructed a mill facility and infrastructure at the Aguila Project for approximately $35 million in 2009, and expanded the mill facility in 2012 and 2013, spending an additional $23 million . The flotation mill expansion, completed at the end of 2013, increased the number of flotation cells , added a second ball mill to allow for additional processing capacity   and a Knelson gravity con centrator .   In 2014 we completed a doré processing facility. The Aguila mill is flexible in its ability to process s everal types of mineralization. It has a differential flotation section capable of processing polymetallic mineralized material and producing up to three separate concentrate products for sale. The mill also has an agitated leach circuit capable of producing gold and silver doré for sale. Depending on the specific type and characteristics of the mineralized material, the mill can process sulfide material in its flotation circuit at a nominal 1,500 tonnes of mineralized material per day. The agitated leach circuit can process a nominal 300 tonnes per day.

Power is provided by diesel generators at the site. We obtained water rights from the Mexican government for an amount of water that we believe is sufficient to meet our operating requirements and pump it approximately five kilometers to the site from a permitted well located near the Totolapam River.

Additional improvements at the site include a second diesel generation power p lant and switch gear, paving a three kilometer section of the road from the mine to the mill, construction of a new surface maintenance garage and fuel station, haul roads from the mine site to the mill, mill facility office space, an assay lab, an exploration office, a tailings impoundment facility and other infrastructure.

During 2015 a third phase tailings facility was constructed with an estimated two   and a half year s holding capacit y, depending on mill throughput. A phase four tailings facility has been engineered and is planned for construction during 2017 .  

Exploration Activities  

Exploration at the Aguila Project during 2015 primarily focused on the Arista mine’s Arista and Switchback vein systems. Currently more than 20 veins have been identif ied at the Arista vein system. The new Viridiana vein was discovered during 2015 along with indications of additional veins. The relatively new Switchback vein system has at least 7 veins with indications of additional veins as well. Drilling the Arista vein system has shown mineralized material over 1,000 meters of strike length and more than 500 meters of depth with certain veins open along strike and depth.  Drilling the Switchback vein system has shown mineralized material 450 meters on strike and 450 meters depth with certain veins open on strike and depth .  

During the year we focused primarily on infill and step-out drilling to further define the Arista m ine’s mineralization and to assist in mine planning. In addition to targeting the vein systems at the Arista underground mine, surface exploration drilling was conducted on the Aguila Project targeting the potential feeder veins of the Aguila open pit , and Santiago veins and the Escondida and Salina Blanca prospects located northwest and southwest of the Arista mine, respectively. We completed an additional 93 diamond drill holes (both surface and underground) totaling 29,363 meters. Economically significant gold, silver and base metal values at Escondida and Salina Blanca were encountered and further drilling is planned in 2016. The results from these activities have also generated additional exploration targets that are marked for future drilling .

During 2015, we drifted approximately 450 meters from our Arista vein system towards the Switchback vein system located approximatel y 500 meters to the northeast. In order to test for potential water flows in the Switchback veins , and prepare for water management , we stopped the drift approximately 50 meters from the veins and set up a third drill station from which we tes ted for water . The ini tial holes did not encounter an   appreciable amount of water , although we do expect to encounter water courses in the future as we develop the Switchback vein system. From the new drill station, we c ontinued our exploration with infill and step-out holes which intercepted high-grade polymetallic gold, silver, copper, lead and zinc mineralization in multiple en echelon veins. 2015 drill highlights included a 15.22 meters wide zone averaging 3.18 g/t gold, 292 g/t silver, 0.87% copper, 1.56% lead and 4.26% zinc which included 1.15 meters grading 12.65 g/t gold, 822 g/t silver, 0.75% copper, 0.93% lead and 1.59% zinc .

D evelopment plans in 2016 include the completion of a second drift from the Arista vein system to the Switchback vein system, which will be located approximately seven levels (140 meters) below the first drift driven to Switchback in 2015 from the fourteen level. Construction of the second drift to Switchback began in January 2016 with a goal to complete it during the third quarter of 2016, which will be dependent on drift progression, rock competency, and potential water courses that may be encountered during development. Once the second drift reaches Switchback, multiple levels are planned for development between these two drifts , followed by preparation of ore blocks for future bulk tonnage mining.

The 2016 exploration program’s primary goal is to continue expanding the Arista m ine’s mineralization at both the Arista and Switchback vein systems. As we continue to drill and expand Switchback along both strike and depth, we   look forward to planned Switchback mine development advancing to a point where   we can touch the mineralized veins

and potentially convert Switchback mineralized material into proven and probable reserves for 2017.

Please see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for information concerning our mining operations at the Aguila Project.  

Exploration Properties  

Margaritas Property

The Margaritas property is made up of the La Tehuana concession. We leased this concession from a third party in October 2002 along with two of the concessions comprising the Aguila property . T he terms of this agreement are discussed under “ Aguila Project ” above. It is comprised of approximately 925 hectares located along our 55 kilometer mineralized trend and adjacent to the Aguila Project.

At the Margaritas property, w e drilled 23 holes totaling 10,409 meters in 2015; t o-date, we have drilled 47 core holes for a total of 18 ,444 meters. High-grade drill results in 2015 were mainly on the Tapada Vein which included 2.15 meters grading 1.15 g/t gold and 599 g/t silver, 0.68 meters grading 1.65 g/t gold and 1,260 g/t silver and 0.30 meters grading 7.05 g/t gold and 4,010 g/t silver. In 2015, a soil and rock geochemical program also continued a t the Margaritas property. This program expanded upon the geochemical program began in 2014. Soil and rock samples were collected on lines oriented from southwest to northeast across the projection of known regional structures. The soil data showed a series of west-northwest and northwest trending trends visible in the epithermal pathfinder suite of metals (gold, silver, arsenic, antimony, mercury and th allium). These linear patterns spatially correlate with known historical mining i n the Margaritas district. The linear patterns also extend beyond and between the known workings and establish additional trends for prospecting along mapped structural orientations. Geological mapping and geochemical sampling identified a new gold and silver mineralized zone called “Trenes” at Margaritas with rock chip samples returning values up to 1.0 meter of 2.6 7 g/t gold and 240 g/t silver. An initial surface diamond drilling program is being planned for Trenes in 2016.

Alta Gracia Property

In August 2009, we acquired claims adjacent to the Margaritas property in the Alta Gracia Mining District by filing concessions known as the David 1 , the David 2 and La Herradura ,   totaling 5,175 hectares .  

Additional follow-up surface drilling was conducted at Alta Gracia during 2015 with 9 diamond drill holes to taling 2,554 meters completed; to date, we have drilled 97 core holes for a total of 21,675 meters .   The 2015 drill campaign continued to focus on the Mirador vein near the his toric Mirador underground mine. High-grade intercepts on the Mirador vein included 4.01 meters averaging 2. 52 g/t gold and 595 g/t silver. A second Mirador vein intercept in the hanging wall returned 2.12 meters grading 1.7 4 g/t gold and 493 g/t silver. The Mirador vein gold and silver mineralization discovered to date still does not show any appreciable base metals, so this precious metal mineralization can   potentially be trucked to and processed through the agitated leach circuit at our mill located at our Aguila Project. In 2015, mineable resources were estimated and metallurgical test work completed with mining and processing of Alta Gracia mineralized material contemplated at our Aguila processing facility in 2016.   Follow-up drilling is also being planned for Alta Gracia in 2016.

Chamizo Property

In June 2011, we staked mineral claims between the Rey   property and Alta Gracia property along  a trend and acquired an exploration concession from the Mexican government of approximately 26,386 hectares referred to as Chamizo .   In March 2013, we acquired a property known as Cerro Colorado (comprised of the San Pedro Fracc. 2 concession) from Almaden Minerals, Ltd. consisting of approximately 1,860 hectares. The Cerro Colorado property is surrounded by our Chamizo concession and we include it as part of the Chamizo property. Any future production from the Cerro Colorado concession is subject to a 2% net smelter return royalty in favor of Almaden.

Because of the close proximity of Chamizo to Alta Gracia, exploration activity began on this property during late 2011 and to date has been limited to geochemical sampling and drilling of eight shallow core holes for a total of 1,327 meters. No significant work was conducted at Chamizo during 2015. In 2016, surface geological mapping and geochemical sampling of several new prospective targets identified on the Chamizo property is expected to continue.

Fuego Property

In March 2013, we acquired the Fuego property (comprised of the San Pedro Fracc. 1 concession) from Almaden Minerals Ltd. subject to a 2% net smelter return royalty. The Fuego property consists of approximately 2,554 hectares and is located south of our Alta Gracia and Chamizo properties. In 2013, Fuego was included in the property-wide airborne geophysical survey. Geologic mapping and surface sampling were conducted on the   Fuego   property during 2013 through 201 5 to allow us to meet the acceptable minimum amount of work required to maintain the claims.   We plan to conduct further geologic mapping and sampling in 2016 .

Rey Property

The Rey property consists of concessions on the far northwest end of our 55 kilometer mineralized corridor in the State of Oaxaca known as Rey ,   El Virrey ,   La Reyna and El Marquez . We acquired the Rey concession from a third party and it is subject to a 2% net smelter return royalty payable to them on a portion of the claims. We obtained the remaining concessions by staking claims and filing for concessions with the Mexican government.

The Rey property is located approximately 64.4 kilometers by road from the Aguila Project. There is no plant or equipment on the Rey   property. If exploration is successful, any mining would probably require an underground mine where mineralized material could be trucked to the Aguila mill located on the Aguila Project for processing. Limited drilling at Rey has encountered gold and silver mineralization up to one meter of 132.5 g/t gold and 1.5 meters of 958 g/t silver. The mineralized material has been located within 100 meters from the surface. To date, we have drilled 48 core holes for a total of 5,273 meters at the Rey property. Early in 2012, we completed a small amount of work to finish refurbishing and extending an existing shaft on the property to permit underground exploratory drilling. We ceased work at the Rey property during 2012, following a request to obtain additional approvals from local community agencies. We continue to work with the local agencies and anticipate resolving the matter, but we have no assurance that we will be able to resume our exploration activities in the near term. If the matter is resolved, we will conduct follow-up drilling and exploration based on the drilling done in 2008. We do not anticipate any significant exploration activities at Rey in 2016 . However, we plan to conduct the acceptable minimum amount of work required to maintain the claims.

Mining Concessions and Regulations in Mexico

Mineral rights in Mexico belong to the Mexican federal government and are administered pursuant to Article 27 of the Mexican Constitution. All of our mining concessions are exploitation concessions, which may be granted or transferred to Mexican citizens and corporations. Our leases or concessions are held by our Mexican subsidiary. Exploitation concessions have a term of 50 years and can be renewed for another 50 years. Concessions grant us the right to explore and exploit all minerals found in the ground. Maintenance of concessions requires the semi-annual payment of mining duties (due in January and July) and the performance of assessment work, on a calendar year basis, with assessment work reports required to be filed in the month of May for the preceding calendar year. The amount of mining duties and annual assessment are set by regulation, may increase over the life of the concession and include periodic adjustments for inflation. Mining concessions are registered at the Public Registry of Mining in Mexico City and in regional offices in Mexico.

Mexican mining law does not require payment of finder’s fees to the government, except for a discovery premium in connection with national mineral reserves, concessions and claims or allotments contracted directly from the Mexican Geological Survey. None of the claims held by DDGM are under such a discovery premium regime.

Ejido Lands and Surface Right Acquisitions in Mexico  

Surface lands within our Oaxaca Mining Unit are Ejido lands (agrarian cooperative lands granted by the federal government to groups of Campesinos pursuant to Article 27 of the Mexican Constitution of 1917). Prior to January 1, 1994, Ejidos could not transfer Ejido lands into private ownership. Amendments to Article 27 of the Mexican Constitution in 1994 now allow individual property ownership within Ejidos and allow Ejidos to enter into commercial ventures with individuals or entities, including fore ign corporations. We have an agreement with the local San Pedro Totolapam Ejido allowing exploration and exploitation of mineralization at the Aguila Project and some of our surrounding properties .  

Mexican law recognizes mining as a land use generally su perior to agriculture. However, the law also recognizes the rights of the Ejidos to compensation in the event mining activity interrupts or discontinues their use of the agricultural lands. Compensation is typically made in the form of a cash payment to the hol der of the agricultural rights. The amount of such compensation is generally related to the perceived value of the agricultural rights as negotiated in the first instance between the Ejidos and t he owner of the mineral rights. If the parties are unable to reach agreement on the amount of the compensation, the decision will be referred to the government.  

We have established surface rights agreements with the San Pedro Totolapam Ejido and the individuals impacted by our proposed operations which allow disturbance of the surface where necessary for our exploration activities and mining operations.

Nevada Mining Unit  

Exploration Properties  

Radar Property

In September 2014, we leased the Radar property from Altan Nevada Minerals Limited for ten years. The Radar property covers an area of approximately 3,550 acres and is made up of 178 unpatented lode claims located in the area known as the Walker Lane Mineral Belt in central Nevada. Radar is immediately adjacent to the past-producing gold-silver-mercury Paradise Peak Mine, near the Round Mountain and Rawhide mines. Pursuant to the lease, we are required to make work expenditures of up to $250,000 annually to maintain our interest in the property and at our option we may purchase the property for $1.5 million, subject to a 3% net smelter return (“NSR”) royalty, at any time prior to the expiration of the lease term.

In 2015, we conducted detailed and property-wide geologic mapping and geochemical sampling as well as completing an initial 6-hole program consisting of 1,985 meters of core drilling at Radar. These holes targeted anomalous gold and mercury–bearing structures along a more than two kilometer trend coinciding with numerous historic mercury mines and prospects. Results of the exploration efforts indicated potential of bulk-tonnage high-sulfidation style gold mineralization in the northern and eastern portions of the property area where mineralized targets are hosted in favorable volcanic tuff units .   Further exploration drilling is being evaluated on the mineralized potential on the Radar property in 2016 .

Goose Property

In December 2014, we leased the Goose property from Nevada Eagle LLC for five years. The Goose property consists of five unpatented lode claims covering approximately 100 acres adjacent to Radar in the Walker Lane Mineral Belt. The claims comprising the Goose property cover “Newman Ridge,” a mountain located directly west of the past producing Paradise Peak mine, near the Round Mountain and Rawhide mines.   We have an option to purchase the property for $175,000, subject to a 2% NSR royalty, at any time prior to the expiration of the lease term. The Goose Property is located within the area of interest for the Radar Property which is being leased from Altan Nevada Minerals Limited and is subject to an additional 3% smelter return royalty. The same bulk-tonnage high-sulfidation style gold mineralization hosted in favorable volcanic tuff units extends onto the Goose property from Radar. Field investigations to identify drill targets were conducted on the Goose property in 2015. Further investigations and exploration drilling are being evaluated for Goose in 2016.

Gold Mesa Property

In November 2015, we acquired an option to purchase a gold bearing property in Nevada, held by Silver Reserve Corporation (“SRC”) , a wholly-owned subsidiary of Infrastructure Materials Corp., which we refer to as “Gold Mesa.” The option gives the Company the exclusive right to purchase the prop erty at any time over a term of 36 months.   The option is exercisable for $270,000 cash and restricted common stock valued at $1,000,000 at closing. There are no work commitments associated with this option.

Gold Mesa consists of approximately 1,780 acres with 89 unpatented claims and 3 patented claims in central Nevada’s Walker Lane Mineral Belt. The property is located 17 miles south-south e a st of the Radar and Goose properties . A portion of the property’s claims were mined historically on a very small scale as an underground mine in the early 1900’s and as a small open pit mine in the late 1980’s.   Existing infrastructure includes nearby electricity, road access and potential water from a historic well located on the property.   Gold Mesa includes the gold property historically known as the Clay Peters Project. After acquiring our option, we staked an additional 140 unpatented claims totaling approximately 2,800 acres which surrounds the original Gold Mesa property.

The property is subject t o a NSR in favor of SRC on future production consisting of a 2% NSR on all cla ims with no existing royalties and a 1% NSR on the three patented claims. There is an existing 2% NSR on the three patented claims payable to an unrelated third party. We have additional rights to purchase back one half of each of the 2% NSR and 1% NSR from SRC subject to certain terms and restrictions and a first right of refusal to purchase the entire NSR upon a proposed disposition by SRC.

Field investigations to identify drill targets and initial exploration drilling are planned for Gold Mesa in 2016 .   We are currently in the process of obtaining the necessary exploration permits .

Office Facilities  

We constructed an administrative office building adjacent to the mill site as part of the facilities at the Aguila Project. We also lease office space in Oaxaca City, Oaxaca consisting of approximately 3,000 square feet.   The lease commenced in 2012 for ten years. In 2014, we sold the building that serves as our executive and administr ative headquarters in Colorado Springs and have leased a portion back und er a renewable one-year lease. We also lease an office in Denver, Colorado consisting of approximately 2,500 square feet, which we renewed in 2015 for three years.